But there is another important principle that must be borne Chap. VII. in mind, viz., that where equities are equal, the law must § 2 (i). prevail. The consequence is, that a mortgagee of the equity of Liability to be redemption may be postponed to a subsequent mortgagee, who, postponed to subsequent having advanced his money without notice, afterwards (although incumbrancer then with notice) obtains possession of the legal estate. From who gets in the legal this results a disadvantage and even danger in taking a mort- estate. gage of an equity of redemption, against which it is difficult to guard. tacking. Another disadvantage attending a mortgage of an equity of Liability to redemption is, that the first mortgagee may, previously to the be ousted by second mortgage, or even subsequently to it if without notice, make further advances to the mortgagor, all of which (as also judgment debts) (i), he will, as hereafter explained (4), be entitled to tack to his original mortgage in preference to the subsequent mortgagee. To guard against this mischief, it is incumbent on a person lending money on an equity of redemption, first to make inquiry of the prior mortgagee into the amount of his demand and inspect the title deeds in his possession, and, secondly, to give him express notice of the proposed mortgage. And it will be advisable, if practicable, i.e., if the first mortgagee will permit, to put notice of the second mortgage on the principal title deed, such as the conveyance to the mortgagor or the like, or on the first mortgage deed; for otherwise the mortgagor might redeem the first mortgage, and convey the legal estate to a stranger without notice, who would thus gain a preference to the prior equitable mortgagee. at law for A further disadvantage is, that the mortgagee has not the No remedy legal remedy, so far as respects the estate, for enforcing pay- enforcing ment of principal or interest, by bringing an action against the charge. mortgagor or his tenant for recovery of possession of the mortgaged property, now substituted for the old action of ejectment, but is driven to seek relief in equity. Again, inasmuch as a second mortgagee is subject to fore- Liability to closure equally with the mortgagor at the hands of the first foreclosure by legal mortgagee, a mortgagee of an equity of redemption may find mortgagee. himself obliged, in order to preserve his security, to redeem the first mortgagee, and so be compelled to advance a larger sum (i) Brace v. Duchess of Marlborough, 2 P. Wms. 491. (Z) See post, pp. 1239 et seq. Chap. VII. than he had originally contemplated, or perhaps than he may then be prepared to lend. § 2 (i). Liability to Or, upon proceeding to foreclose, the first mortgagee may consolidation possibly be in a position to consolidate his mortgage with by legal mortgagee. mortgages upon other property of the mortgagor (1), in which case the mortgagee of the equity of redemption will have to provide for a still greater outlay in order to preserve his security, and will also be exposed to the risk of losing his security entirely, should such other property of the mortgagor prove to be an inadequate security for the mortgages made upon it. No right to title deeds. Fraudulent concealment of prior incumbrance. A further disadvantage is that a mortgagee of an equity of redemption is not entitled to the title deeds to the property mortgaged, which follow the legal estate into the hands of the first mortgagee. On this account, in the absence of the precaution above suggested, a mortgagee of an equity of redemption is constantly subjected to the risk of being postponed to a stranger obtaining the legal estate from the first mortgagee without such notice of that charge as would be imputed to a person taking such conveyance without requiring the title deeds to be handed over, or their absence accounted for (m). Another disadvantage, against which no prudence can guard, is, that the mortgagor may secretly have executed prior mortgages of the equity. For so gross a fraud the legislature has enacted that his right of redemption shall be utterly lost. By the statute 4 & 5 Will. III. c. 16, it is, in effect, enacted that if any person shall mortgage any lands, and again mortgage the same lands or any part thereof to another mortgagee, and shall not discover the first mortgage to the second mortgagee, he shall have no equity of redemption against the second mortgagee, who may hold the mortgaged lands free from such equity, as if he had acquired them by absolute purchase (n). It will be seen that the language of the statute is confined to a second mortgage of the same lands, and that the legislature does not appear to have contemplated that other estates might be also comprised in the second mortgage. To such cases it has been held, in Stafford v. Selby (0), that the statute, being penal, does not apply, unless the property joined with the equity of redemp (1) See post, Chap. XLIII., as to consolidation. (m) See post, Chap. LVIII. sect. 3. (n) James v. Kerr, 40 Ch. D. 449. (0) 3 Vern. 589. tion is so inconsiderable that its introduction into the mortgage Chap. VII. was palpably fraudulent, and for the mere purpose of affording § 2 (i). a pretext for the evasion of the statute. The same case also determined that, to comply with the directions of the statute, the mortgagor must give the second mortgagee notice in writing under his hand of all the prior incumbrances; and that an assignee of the second mortgage, as well as a subsequent mortgagee redeeming the second mortgage, has the benefit of the statute; but that to entitle a second mortgagee to the advantage of the statute, he must come into Court with clean hands and free from fraud. The statute does not give a right to the second mortgagee to come actively into Court to enforce the forfeiture; and in order to bring the Act into operation, both the first and second mortgages must be, in the strictest sense, mortgages reserving a right of redemption (p). The forfeiture will not arise so long as there is a legal right to redeem, but only after the stipulated time for redemption has passed, and therefore the equity of redemption alone remains (q). By a more recent statute (r), it is enacted that any seller or Liability of mortgagor or mortgagor, or the solicitor or agent of such, who conceals any his solicitor settlement, deed, will, or other instrument material to the title, to criminal proceedings. or any incumbrance, from the purchaser or mortgagee, or who falsifies any pedigree on which the title does or may depend in order to induce him to accept the title, with intent to defraud, is guilty of misdemeanour, and also liable to an action for damages at the suit of the purchaser or mortgagee; but no prosecution is to be commenced without the sanction of the Attorney-General, or, if that office be vacant, of the SolicitorGeneral. This section, it is conceived, can only apply to the fraudulent concealment of an existing incumbrance, nor will the vendor's solicitor be criminally responsible if he suppress a mere equitable charge, which has been satisfied, or which no longer affects the title (s). Where there is a condition of sale that no title to the property sold shall be shown before a certain date, semble, that the above Acts do not apply to the omission of an incumbrance prior to (p) Kennard v. Futvoye, 2 Giff. 81. See Clark v. Hoskins, 15 W. R. 1161. (9) Dav. Conv. (4th ed.) Vol. II. pt. ii. p. 5. (r) 22 & 23 Vict. c. 35, s. 24, as Chap. VII. that date (t). But there is no fraudulent concealment of a claim when the person is under no obligation to disclose it, as a witness under examination (u). § 2 (i). Liability in equity. Disadvantages of mortgage of reversion expectant on mortgage term. Independently of statutory enactment, a mortgagor or his solicitor, who fraudulently conceals an incumbrance on the property which is known to him, is liable in equity to a subsequent mortgagee or purchaser (x). Where the existence of a legal mortgage was concealed by the mortgagor from a purchaser for value, it was held that the mortgagee was entitled to a decree of foreclosure against the purchaser, and that the latter could not avail himself of a reconveyance to the mortgagor, which, having been obtained by fraud, was declared null and void (y). Where an incumbrance has been omitted from an abstract by the vendor, though through ignorance, he must pay it off, and cannot rescind the contract under the clause enabling the vendor to rescind if he declines to comply with any requisition (~). On the same principle, false or incorrect representations as to incumbrances must be made good, as where the representative of a mortgagor asserted that part of the mortgage had been transferred to other property (a). But where the representation is made by a stranger he cannot be compelled to make good the loss where no fraud was intended (b). ii.-Mortgage of Reversion expectant on Mortgage Term.A legal reversion expectant on a mortgage term must not be confounded with an equity of redemption. A mortgage in fee, therefore, after a mortgage for a term of years, will, of course, take precedence of mere equitable incumbrances upon the term. But even to a mortgage of such a nature, without some degree of precaution, a degree of hazard attaches, for the first mortgagee may continue to make advances to the mortgagor after the date of the mortgage in fee, either on his original security, or on judgment or statute security; all of which he will be entitled to tack, unless he had notice of the second mortgage; and even a subsequent mortgagee of the mere equity of redemption might obtain an advantage over the mortgagee of the legal reversion by procuring an assignment of the first mortgage, to which he might tack his equitable charge if he had not notice of the intervening mortgage at the time of advancing his money. To guard against the first of these dangers, it is proper for the mortgagee of the legal reversion to make the like inquiries of the mortgagee of the term, and to give him the like notice, as above mentioned, in the case of a mortgage of the equity of redemption. And against the second danger, the notice to the first mortgagee might be of service (c). Chap. VII. § 2 (ii). SECTION III. OF AGREEMENTS FOR MORTGAGES. to borrow or i. As to Specific Performance, &c. of Agreements for Mort- Agreement gages.-Specific performance will not be enforced of a mere lend not agreement either to borrow (d) or to lend (e) on mortgage so specifically long as it remains executory, without any performance of the enforceable. terms of the agreement by either the lender or the borrower. The rule applies to a contract to lend to a company money payable by instalments upon the security of debentures to be issued by the company; and if the lender makes default, the unpaid instalments do not constitute a debt, and the company are only entitled to damages for the actual loss caused by breach of contract (ƒ). But the Court will specifically enforce an agreement to give security for a past debt in consideration of forbearance (g), or for money actually advanced before or at the time of the (e) Coote on Mortgages (5th ed.), 272. Vol. I. pp. 411, 412. (d) Rogers v. Challis, 27 Beav. 175; Chinnock v. Sainsbury, 6 Jur. N. S. 1318. (e) Sichel v. Mosenthal, 30 Beav. 371; Larios v. Gurety, L. R. 5 P. C. 346. See Hunter v. Langford, 2 Moll. agree (f) South African Territories v. Wallington, (1898) A. C. 309. (g) Alliance Bank v. Broom, 2 Dr. & Sm. 289; Carew v. Arundell, 8 Jur. N. S. 71; Hermann v. Hodges, L. R. 16 Eq. 18; Jones v. Greatwood and Makin v. Hughes, cited Seton, 2042. Specific peragreement to formance of secure past debts. |